Wednesday, May 13, 2009

Credit Crunch of 1294?

The current recession has been compared to a number of other economic downturns - the early 1990s, the early 1980s, the 1930s (most often used), the 1907 Panic, and even a couple of events in the 19th century. This is the first time I recall it being compared to an event in the 13th century.

This article from the Voxeu blog is a short, interesting read. Like the current situation, part of the problem was an inability of financial institutions to meet short-term obligations by converting long-term assets to cash. This was compounded with an inability to borrow additional amounts in the short-term.

I was interested in the resulting fiscal and monetary policy approaches used by parties to solve the crisis - neither of which seems to have been good for the economies involved. I wonder if there are lessons to be learned here?

This example seem to be an interesting way to link current events to historical ones for those who teach world history; and to provide another historical example for those teaching economics.

At the very least, it would seem to reinforce the old adage that if history doesn't always repeat itself, it sure rhymes.

This post relates to the following Keystone Economic Principles:
1. We all make choices.
2. There ain’t no such thing as a free lunch.

3. All choices have consequences.
4. Economic systems influence choices.

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